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Did Venezuela's Oil Diplomacy Challenge American Interests in the Caribbean?

Smritirekha is an MA International Studies student who likes to write mostly on observational topics that have social relevance.

Hugo Chavez and Fidel Castro

Hugo Chavez and Fidel Castro

Venezuela has been a petro giant and oil has been the largest pillar of its economy as well as its foreign policy. It has the world’s largest proven oil reserves, which has provided Venezuela with a powerful tool to assert its autonomy from the West in terms of garnering political support and UN votes through its soft power diplomacy. This, in turn, has also largely determined its relations with oil-producing countries like Iran and Russia.

However, Venezuela’s foreign ambitions have been a mirage based on a resource curse. Although oil diplomacy opened many new frontiers for the country, it failed to get past its mono-commodity dependence.

How Did Venezuela's Oil Diplomacy Challenge the US?

Historically, Venezuela has always deemed the Caribbean as its natural area of influence because of geographical proximity as well as similar cultural affinity. Oil became the center of Venezuela’s international relations during the presidency of Perez, but it underwent an important change when Hugo Chavez came to power with focus on forming an Anti-American Axis under Venezuelan leadership. When Chavez came to power in Venezuela in 1999, he introduced three salient changes:

  1. He dropped the liberal democratic ideology and adopted a socialist stance.
  2. He resumed the activist foreign policy tradition of Venezuela by adopting a confrontational line with the West and pushed for a radical re-arrangement of the international system.
  3. He sought to dampen Venezuela’s economic dependence on exports to the United States.

Chavez firmly believed that the US was a genuine threat to Latin American independence and that the economic and social problems of Latin America were purely because of US hegemony. Chavez sought to end this traditional American predominance by excluding it from the various Latin American integration projects. The various ways through which Venezuela tried to challenge US interests in the Caribbean are discussed below.

1. The Creation of ALBA

The most important manifestation of these integration projects was the Bolivarian Alliance for the Peoples of Our America (ALBA). ALBA was founded in December 2004 with the signing of an agreement between Chavez and Fidel Castro of Cuba. Under this agreement, Cuba greatly benefitted from Venezuelan generous oil supplies at preferential rates. The main goal of this agreement was regional economic integration between Latin America and the Caribbean using oil as an infallible tool. ALBA nations also formulated their own virtual currency called the SUCRE, thus providing an alternative to the traditional reliance on the US Dollar. Regional integration also meant reduced dependence of Venezuelan exports to the US.



2. The Petrocaribe

This was an initiative launched by Venezuela in 2005. It allows signatory countries (largely Caribbean countries) to purchase Venezuelan oil at discounted prices. As a region, Caribbean countries spend 13% of their GDP on oil imports. At a time when Caribbean countries were undergoing slow economic growth and high indebtedness, Petrocaribe came to offer immense support. In 2012, Venezuela shipped an average of 1,08,000 barrels per day at an average to the Petrocaribe members.

Buying the Loyalty of the Caribbean Nations

Through all these preferential treatments, Venezuela was trying to buy the loyalty of the Caribbean nations pulling them further away from the American influence. When Venezuela started doing preferential deals with the Caribbean, it implied that they are no longer at the mercy of United States and they could take care of themselves on their own.

ALBA gave an alternative to the US-sponsored neoliberal model of economic integration. The US had opposed the Bolivarian Alliance right from its inception and it labelled the ALBA as an “axis of subversion”. It perceived too much Venezuelan influence in the Caribbean as a ‘threat to democracy’ that needs to be confronted at any cost. It also held Venezuela responsible for the derailment of the US backed Free Trade Area of the Americas. Thus, the US was no longer in a position to brazenly control its ‘backyard’ as it did during the 20th century.

Was the US Actually Challenged?

Venezuela tried its best to leave no stone unturned in order to distance the US from the Caribbean through its oil-based diplomacy. However, the Venezuelan agenda was not as concrete as it should have been. An alternative to America in the Caribbean and the whole of South America was not as dreamy an adventure as it sounded. Although Venezuela made good attempts to distance itself from the US hegemony by solely relying on its oil resources, it could not compete against a giant like the United States which offered much more to the Caribbean nations than just oil.

Here are the reasons why Venezuela could not challenge US interests in the Caribbean:

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1. Venezuelan Policy Was Not an Isolationist Agenda

A partnership with Venezuela did not mean that the Caribbean nations were barred from trade with the United States. In fact, under the Caribbean Basin Initiative (CBI), US remained a major trading partner for the Caribbean nations. The CBI came to be an American alternative to the ALBA.

2. Venezuela’s Big Brother Image to the Caribbean Was in the Doldrums When It Hit Its Worst Economic Crisis

Hugo Chavez governed Venezuela at a time when oil prices were relatively higher, but when Nicolas Maduro came to power, the Venezuelan economy entered a severe economic downturn because of lowering global oil prices leading to increase in the production cost and, corruption in the government. By adopting a socialist stance, Chavez moved the economy in a less market-oriented direction featured by widespread nationalizations along with currency and price controls. These policies discouraged foreign investment and created market distortions.

Moreover, the government never made any move to decrease its reliance on oil. When Maduro took office, he inherited economic policies reliant on proceeds from oil exports. When oil prices lowered by 50% in 2014, Maduro government was ill equipped to deal with the issue. Today Venezuela is at an abject state of poverty, hunger and needless to mention the sky rocketing hyperinflation. Venezuela’s poor economic state had put its big brother image in to question, an appropriate moment used by the US to enhance its ties with the Caribbean countries.

Chavez's Intentions Were Clear, But He Underestimated the US Influence in the Caribbean

Chavez’s intentions were clear when he set out to overtake American predominance in Latin America. He challenged multiple US administrations with his oil based policies in the Caribbean and enhancing ties with regimes like Iran and Iraq that had been hostile to US. But, US influence in the Caribbean was already quite deep and it was not limited to oil which was Venezuela’s only offering to the Caribbean. With decline in global oil prices, Nicolas Maduro faced fresh economic instability in the country and it was hard for his regime to generate profit while still sticking to the socialist agendas of Chavez.

Therefore, the concluding claim of the essay is that Venezuelan Oil Diplomacy in the Caribbean was the result of a superficial understanding of the actual realities and a mismatch of domestic socialism and diplomatic capitalism. Although the initial intent was to give a severe setback to the US, Venezuela did not foresee the long-term consequences and it underestimated the US’s grasp in the Caribbean region.


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© 2019 Smritirekha Sarma Haloi

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